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| 1. |
The measure of price elasticity of demand of a normal good carries minus sign while price elasticity of supply carries plus sign. Explain why? |
| Answer» Solution :The measure of PRICE elasticity of demand carries a minus sign because it SHOWS an inverse relationship between price and quantity demanded i.e., other things remaining constant, as the price of a good rises or falls, the quantity demanded of the good falls (or rises). On the other hand, price elasticity of SUPPLY carries plus sign as there exists a positive relationship between the supply of a commodity and its price. To put in other WORDS, when the price of a good rises (or falls), then the quantity SUPPLIED will increases (or decrease), other things remaining unchanged. | |